Perpetual Nat. Life Ins. Co. v. Brown, s. 10637

• Decision Date: 18 December 1970
• Docket Number: 10751,Nos. 10637,s. 10637
• Citation: 85 S.D. 330,182 N.W.2d 216
• Parties: PERPETUAL NATIONAL LIFE INSURANCE CO., a Corporation, Plaintiff and Respondent, v. Byron T. BROWN and Joseph H. Bottum III, Defendants and Appellants.
• Court: South Dakota Supreme Court

Page 216

182 N.W.2d 216

85 S.D. 330

PERPETUAL NATIONAL LIFE INSURANCE CO., a Corporation Plaintiff and Respondent, v. Byron T. BROWN and Joseph H. Bottum III, Defendants and Appellants.

Nos. 10637, 10751.

Supreme Court of South Dakota.

Dec. 18, 1970.

Rehearing Denied Jan. 22, 1971.

Bangs, McCullen, Butler, Foye & Simmons, Geo. A. Bangs, Rapid City, for defendant and appellant Brown.

Roswell Bottum, Rapid City, for defendant and appellant Bottum.

Whiting, Lynn Jackson, Freiberg & Shultz, Gene N. Lebrun and Horace R. Jackson, Rapid City, for plaintiff and respondent.

HANSON, Judge.

This is an action by Perpetual National Life Insurance Company to recover on a promissory note secured by a mortgage upon real property. Defendants, Byron T. Brown and Joseph H. Bottum III, answered and alleged the note had been completely extinguished, satisfied and paid by virtue of the prior foreclosure by action of the real estate mortgage securing the same. Following trial judgment was entered on June 28, 1968 in favor of plaintiff and against defendants jointly and severally in the total amount of $46,181.95. Defendant Bottum perfected a timely appeal from the judgment, but defendant Brown failed or neglected to do so. Later Brown moved to vacate the judgment under Rule 60 or RCP. This was denied and Brown has appealed from the order denying such motion.

The facts are not materially disputed. On June 24, 1964, Perpetual National Life Insurance Company made a loan of $35,000 to Swim, Inc., a corporation organized to construct and operate a swimming pool in the City of Custer. In consideration of its loan Perpetual received a promissory note from Swim, Inc., signed also by defendants Brown and Bottum personally. The note was secured by a real estate mortgage on certain lots in the City of Custer, South Dakota upon which a swimming pool was to be or was being constructed.

On December 9, 1964 Perpetual National commenced an action in the Circuit Court of Custer County against the mortgagor, Swim, Inc., and certain lienholders requesting judgment against the mortgagor in the amount of $35,000 plus interest; for the foreclosure and sale of the property; and for a determination of the inferiority of the liens. The lien claimants answered and counterclaimed, alleging priority over the mortgage. Subsequently other lien claimants, including the Custer Swimming Pool, Inc., as holder of a vendor's lien, were allowed to intervene. Brown and Bottum were not made parties to the foreclosure action and did not seek intervention.

During the trial of the foreclosure action the note and mortgage were identified as exhibits and admitted into evidence. Priority of the various mechanics liens was established by stipulation of counsel for Perpetual National. The priority of the vendor's lien was determined by the court after a hearing. The mortgage holder made no offer to establish the fair and reasonable value of the mortgaged premises or to otherwise comply with the provisions of SDCL 21-47-16.

The judgment entered in the Custer foreclosure action provided, substantially, as follows: (1) Each of the lienholders was granted judgment against the mortgagor, Swim, Inc., (2) all of the mechanics liens were of equal rank, (3) the mortgaged premises was ordered sold by the Sheriff of Custer County 'to satisfy the amounts of the several liens', (4) the Sheriff was ordered to distribute the proceeds of the sale in the following order:

(1) Fees, disbursements and commissions of the Sheriff's sale.

(2) Amounts due mechanics lienholders.

(3) Amount of vendor's lien.

(4) Any balance remaining to be paid to Perpetual National Life Insurance Co. in the amount not to exceed $35,000 plus interest from and after June 24, 1964, and

(5) Any sum remaining after payment of the aforesaid to be paid to Swim, Inc.

Pursuant to this judgment the mortgaged property was advertised for sale by the Custer County Sheriff and sold on July 25, 1965 for the sum of $21,000 ostensibly to the Custer Swimming Pool, Inc. In applying the proceeds of sale as directed by the judgment the Sheriff paid the sum of $94.61 to Perpetual National for application on the mortgage obligation.

Sometime prior to the foreclosure sale Perpetual National advanced $21,000 to the holder of the vendor's lien, Custer Swimming Pool, Inc., which was used to make and satisfy the bid at the foreclosure sale. A certificate of sale was issued to Custer Swimming Pool, Inc., and later assigned to Perpetual National. Subsequently, Perpetual National received a Sheriff's Deed and eventually sold the swimming pool property to the City of Custer.

The present action to recover the full amount of the promissory note against Brown and Bottum was commenced by Perpetual National in the Circuit Court of Pennington County on December 1, 1965. The trial court concluded the prior foreclosure action did not extinguish defendants' obligations on the note and rendered judgment for Perpetual National for the full amount of the principal and interest due on the promissory note less the sum of $94.61 received from the proceeds of the Custer County foreclosure sale.

The basic issue on appeal is whether the following deficiency judgment act applies to, or affects, the present action to recover on the promissory note.

'21-47-15. Purchase by mortgagee at sale--Fair and reasonable bid required.--In any foreclosure of a mortgage upon real estate by action, the mortgagee, his assigns or their legal representatives, may purchase the premises, or any part thereof, at such foreclosure sale, providing he bids fairly and in good faith, and bids the fair and reasonable value thereof.

'21-47-16. Proof required of mortgagee bidding less than amount of debt--Court decree permitting bid--Execution for deficiency.--If the holder of such mortgage is not willing at such sale to bid the full amount of the judgment debt, it shall be the duty of such mortgage holder to establish at the time of the trial by competent proof to the satisfaction of the court, the fair and reasonable value of the mortgaged premises, and the court shall determine the same in its decree; and if the court shall find such fair and reasonable value to be less than the sum due on said mortgage, with costs and expenses of sale, it may by such decree authorize such mortgage holder to bid not less than the fair and reasonable value as thus determined, and if a deficiency remains after the foreclosure sale, such mortgagee, or his assigns, shall be entitled to a general execution for such deficiency...